Domestic financial regulation and external borrowing

Sergi Lanau, 19 July 2011The global crisis has forced a root-and-branch rethink of financial regulation. This column discusses the international dimensions. It presents new evidence to suggest that non-banks tend to borrow more abroad when domestic regulation is tight.Full Article: Domestic financial regulation and external borrowing

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The IMF 2009 country report on Canada discusses there current economic condition. As part of that they explore the success Canada had in regulating their banking sector (which stands in stark contract to the catastrophic regulatory failures in the USA and Europe). And also provide ample evidence of that wise regulation did indeed prevent the financial crisis.

Canada’s banks rank their prudential regulator, the Office of the Superintendent of Financial Institutions (OSFI), ahead of other regulators domestically and abroad when it comes to the relationship between the watchdog and the financial institutions, according to The Strategic Counsel, an independent research firm.

Findings at the Bureau of Statistics, show US employers added 211,000 jobs to the economy, against the estimated 200,000, according to Bloomberg’s economists survey. Alongside November’s positive numbers, the Government announced an uptick in the jobs data for September and October. The unemployment rate has stayed low at 5%, Hawks on Wall Street suggest the strong jobs data is a positive sign, another milestone in achieving the Fed’stargets. The report was received with enthusiasm, reflected in yesterday’s stock price movements yesterday.

It wasn’t too long ago that Canada’s largest banks pined for membership in the exclusive and powerful club of the world’s largest financial giants. Now that the 2008 financial meltdown is transforming megabanks from once-mighty emblems of national pride to international pariahs, they could well end up becoming fixtures among their global peers.

Regulatory arbitrage is an essential feature of modern banking. This column presents new evidence on avoiding macroprudential policies by borrowing from abroad. Domestic non-banks borrow more from abroad after an increase in capital requirements, but not after an increase in lending standards. This is most likely because of differences in the way the two regulations apply, and suggests that we should have strong frameworks for reciprocating capital regulation.

Theodore H. Moran, Lindsay Oldenski, 31 October 2013Criticism of 'offshoring' by US multinationals is widespread among politicians. The underlying assumption is that multinational corporations substitute domestic economic activity for foreign. This column presents evidence that foreign and domestic investment go hand-in-hand at the firm level.